U.S. Stocks Show Significant Recovery Attempt After Early Sell-Off
After moving sharply lower at the start of trading on Friday, stocks have shown a significant recovery attempt over the course of the morning. The major averages have climbed well off their early lows but are currently in negative territory.
The Dow is currently down just 3.84 points or less than a tenth of a percent at 32,722.98 after falling by more than 200 points in early trading. The Nasdaq is down 38.25 points or 0.3 percent at 12,682.33, while the S&P 500 is down 7.45 points or 0.2 percent at 4,144.49.
The early sell-off on Wall Street came following the release of the Labor Department’s closely watched monthly jobs report.
The report showed employment in the U.S. jumped by much more than expected in the month of July, leading to concerns about the outlook for interest rates.
The report showed non-farm payroll employment spiked by 528,000 jobs in July after surging by an upwardly revised 398,000 jobs in June.
Economists had expected employment to climb by about 250,000 jobs compared to the addition of 372,000 jobs originally reported for the previous month.
With the stronger than expected job growth, the unemployment rate unexpectedly edged down to 3.5 percent July from 3.6 percent in June. The unemployment rate was expected to remain unchanged.
While the data paints a positive picture of the labor market, the report may also give the Federal Reserve confidence they can continue aggressively raising interest rates without causing a recession.
“The unexpected acceleration in non-farm payroll growth in July, together with the further decline in the unemployment rate and the renewed pick-up in wage pressure, make a mockery of claims that the economy is on the brink of recession,” said Michael Pearce, Senior U.S. Economist at Capital Economics.
He added, “This raises the odds of another 75bp rate hike in September, although the outcome depends more on the evolution of the next couple of CPI reports.”
Selling pressure has waned over the course of the morning, however, as easing recession fears inspired traders to go bargain hunting after the initial drop.
Energy stocks have moved sharply higher over the course of the morning, regaining ground following weakness. The rebound comes as crude oil for September delivery is jumping $1.26 to $89.80 a barrel after falling to the lowest levels since Russia’s invasion of Ukraine.
Reflecting the strength in the energy sector, the Philadelphia Oil Service Index is up by 4.5 percent and the NYSE Arca Oil Index is up by 2.8 percent.
Substantial strength has also emerged among steel stocks, as reflected by the 2.6 percent surge by the NYSE Arca Steel Index.
On the other hand, gold stocks are seeing significant weakness on the day, resulting in a 1.8 percent slump by the NYSE Arca Gold Bugs Index.
The weakness among gold stocks comes amid a decrease by the price of the precious metal, with gold for December delivery falling $15.30 to $1,791.60 an ounce.
Interest rate-sensitive utilities, housing and commercial real estate stocks have also moved to the downside amid a jump in Treasury yields.
In overseas trading, stock markets across the Asia-Pacific region moved mostly higher during trading on Friday. Japan’s Nikkei 225 Index advanced by 0.9 percent, while China’s Shanghai Composite Index jumped by 1.2 percent.
Meanwhile, the major European markets have turned mixed on the day. While the U.K.’s FTSE 100 Index is up by 0.2 percent, the German DAX Index is down by 0.1 percent and the French CAC 40 Index is down by 0.4 percent.
In the bond market, treasuries have moved sharply lower following the stronger than expected jobs data. Subsequently, the yield on the benchmark ten-year note, which moves opposite of its price, is up by 17.1 basis points at 2.847 percent.
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